1. FDA Counsel.com Financial Disclosure – Duties and Strategies for Clinical Studies Michael A. Swit, Esq. Law Offices of Michael A. Swit 539 Samuel Ct. Encinitas, CA 92024 760-815-4762 -- fax: 760-454-2979 mswit@fdacounsel.com www.fdacounsel.com

2. FDACounsel.com Presented to: San Diego Chapter, Association of Clinical Research Professionals (ACRP) January 21, 2003 San Diego, California

3. FDACounsel.com How to Focus on the “Law” of Financial Disclosure Law School in 60 seconds What is “law”? U.S. Constitution Statutes – Federal Food, Drug, and Cosmetic Act (“the Act”) Regulations – force and effect of law – 21 CFR Part 54

4. FDACounsel.com How to Focus on the “Law” of Financial Disclosure … What’s not “law”? Anything else FDA writes – guidances, speeches, warning letters, complaints in Federal court – “Guidance” – “…describes the agency’s interpretation of or policy on a regulatory issue” – 21 CFR 10.115(b)(1) “…do not legally bind the public or FDA…” – 21 CFR 10.115(d)(1)

5. FDACounsel.com How to Focus on the “Law” of Financial Disclosure FDA advisory opinions – formal position of FDA; binding until refuted; FDA can’t take regulatory action vs. someone who relies on an FDA advisory opinion – 21 CFR 10.85(e) Preambles to proposed or final rules = an advisory opinion – 21 CFR 10.85(d)(1) “Common” law = case law

6. FDACounsel.com How to Focus on the “Law” of Financial Disclosure So, where do we find the law of Financial Disclosure? NOT: in Constitution, the Act (or any other law administered by FDA), or the Common Law YES: Regulation – 21 CFR Part 54 Problem – often doesn’t say much more than the definition on SPOOS on Slide # What do you do -- read every word with care

7. FDACounsel.com How to Focus on the “Law” of Financial Disclosure Finding the law of Financial Disclosure … YES in the Feb. 2, 1998 Federal Register -- --- see preamble to the Final Rule = binding advisory opinion read very carefully The rest is commentary … The March 2001 Guidance document FDA presentations at DIA, RAPS, etc. Caution – FDA does not cite GAAP

8. FDACounsel.com Financial Disclosure – the Basics Goal -- Reduce potential for bias in clinical studies and enhance human subject protection How implemented FDA Rules @ 21 CFR Part 54; Feb. 2, 1998 – published in F.R.; effective 1 year later FDA Guidance: “Financial Disclosure by Clinical Investigators” – March 20, 2001

9. FDACounsel.com Basics… Requirements – for any application (NDA, PMA, BLA, etc.) submitted after effective date, applicant must: disclose data on the “financial interest” of “clinical investigators” of “covered clinicals studies; or certify there are NO disclosable interests

10. FDACounsel.com Basics… “Clinical investigators” – covers: Principal investigators Sub-investigators named in 1572 spouses and dependent children exempted: per March 2001 Guidance -- “nurses, residents, or fellows and office staff who provide ancillary or intermittent care but who do not make direct and significant contribution to the data”

11. FDACounsel.com Basics… The Five Basic “Financial Interests” subject to disclosure -- Direct payments > $25,000 -- aka “Significant Payments of Other Sorts” or SPOOS excludes costs to conduct the clinical studies includes honoraria, grants to fund ongoing research, compensation for or in the form of equipment or services, or retainers for ongoing consultation disclosure (for all interests) must be made during the “covered” clinical trial and for one year following completion of the trial

12. FDACounsel.com Basics … The Five “Financial Interests” … Equity interest of more than $50,000 in a publicly traded company Ownership interest, stock, stock option or other financial interest, no matter how small, the value of which cannot be readily determined through reference to public prices (e.g., any privately held company or unlisted equity interests)

13. FDACounsel.com Basics … The Five “Financial Interests” … Proprietary interest in the investigational product including, but not limited to, patents, copyrights, trade secrets, and licenses Financial arrangements under which the compensation (e.g., money, equity interest, royalty interest) could be higher for a favorable trial outcome than for an unfavorable trial outcome

14. FDACounsel.com Basics … “Covered Studies” – trials FDA or the sponsor relies on to establish that the tested product is effective; or a study in which a single investigator makes a significant contribution to the demonstration of safety FDA is particularly concerned with Phase II and III trials (efficacy) and bioequivalence studies where results obtained by a single investigator can have a profound statistical effect on trial outcome In general, large open-label studies conducted at multiple sites, treatment protocols, Phase I tolerance studies, pharmacokinetic studies, and most clinical pharmacology studies are not “covered” studies

15. FDACounsel.com How FDA Addresses Questionable Financial Deals FDA may take "any action it deems necessary to ensure the reliability of the data, including": FDA itself auditing the data from that investigator; Requesting the applicant submit further analyses of data; e.g., to evaluate the effect of that investigator's data on the overall study data; and …

16. FDACounsel.com How FDA Addresses Questionable Financial Deals … FDA may take "any action it deems necessary” … Requesting sponsor conduct additional independent studies to confirm the results of the questioned study; and Refusing to treat the covered clinical study as providing data that can be the basis for agency action (e.g., an application approval).

17. FDACounsel.com Addressing Financial Disclosure Before FDA Does Clinical investigator selection process -- make compliance an integral aspect of selection find out early, before clinical protocols are set in stone; allows you to possibly address via study design to minimize bias if present, document per regulations

18. FDACounsel.com Addressing Financial Disclosure Before FDA Does … Clinical study agreements should “mirror” the regulations – mandate disclosure of Interests or a certification there’s nothing to disclose a constant duty to update if there is any change include the right to obtain a one-year post study update regarding interests CRO agreements should obligate the CRO to obtain disclosure/ certification

19. FDACounsel.com Minimizing Bias In Event of Financial Disclosure Key – take the action early; you will have to describe it later in your marketing application and you also may not be able to address effectively later Possible angles: multiple study sites/investigators blinding objective endpoints randomized assignment of patients to treatment v. control groups have someone other than investigator measure subjective endpoints

20. FDACounsel.com Other Considerations The Jesse Gelsinger scenario -- If an investigator has a significant financial interest, has that been adequately disclosed in the study’s informed consent documents?? Other entities may also impact financial disclosure duties, such as: the investigator’s institution (e.g., university or hospital) may have separate rules with different, lower thresholds HHS rules may apply as well (e.g., if federally funded); and are not identical

21. FDACounsel.com Why comply? It’s the law If FDA doesn’t get you, Alan Milstein and Bill Lerach will!!

22. FDA Counsel.com “SPOOS” The Do’s and Don’t’s of “Significant Payments of Other Sorts”

23. FDACounsel.com What’s a SPOOS? Direct “payments” > $25,000 -- aka “Significant Payments of Other Sorts” or, more precisely, per 21 CFR 54.2(f), means:

24. FDACounsel.com So How Do We Know If It’s A SPOOS? “… payments made by the sponsor of a covered study to the investigator or the institution to support activities of the investigator that have a monetary value of more than $25,000, exclusive of the costs of conducting the clinical study or other clinical studies (e.g., a grant to fund ongoing research, compensation in the form of equipment or retainers for ongoing consultation or honoraria) during the time the clinical investigator is carrying out the study and for 1 year following the completion of the study.”

25. FDACounsel.com “… payments” Remember – this is a noun – thus, we are describing types of remuneration Rule – silent directly, but indirectly (“e.g.”) makes clear can include: honoraria equipment retainers for consultation

26. FDACounsel.com “… payments …” Preamble – fairly silent on what’s a payment other than those examples actually in the Rule. exception – FDA: no duty to disclose competing interests that also could bias the investigator (see Comment #17) Guidance – travel expenses added to mix excessive; or for other family members (FAQ #26) Common sense – has an immediate or measurable value – arguably is a payment; if your friendly CPA would regard as income if you were a sole proprietor

27. FDACounsel.com “… payment.” Gray areas: What if deferred until after one year from study completion? What if contingent on an event unrelated to study’s success – e.g., the stock reaches $XX in value, we will pay you $25,001? What if duty to pay back or return? Arguably, look at: FRV/FMV at end of use during study interest – opportunity cost of money

28. FDACounsel.com “… made” Intertwined with “payment” What if only parts of the payment have been made (see, also, “What is $25,000” slide, to follow)? may depend on whether contingent What if a present pledge to give the money at a time after the study completed? Rule: silent Preamble: silent Guidance: silent

29. FDACounsel.com “… by the sponsor” “By” what if made by someone else, but the money came from the sponsor originally? might look to CME rules for guidance conspiracy to avoid 21 CFR 54? “Sponsor” -- per 21 CFR 54.2(h) = “…the party supporting a particular study at the time it was carried out” – thus, the “applicant” – a term itself defined in 21 CFR 54.2(g) – may not be “sponsor”

30. FDACounsel.com “… by the sponsor? must they be named in the IND? what re joint venture partner (e.g., Lilly/Icos on Cialis®) not in the IND? “the” – DOES THAT MEAN THERE CAN ONLY BE ONE PERSON WHO’S THE SPONSOR? risky argument to make and inconsistent with other FDA positions Waxman-Hatch Act – “conducted or sponsored” for 3-year exclusivity files the IND; or provides significant support to the study

31. FDACounsel.com “…sponsor?” Preamble: silent Guidance: whoever provides “material” support (either money or test product) “sponsor” here is not same as some other FDA regulatory definitions of sponsor (e.g., 21 CFR 312.53 and 812.43, where a “sponsor” is someone who submits a marketing application) Common sense: usually whoever pays the bills Trap for unwary – CRO can be a sponsor under Guidance if provides things of value to CI’s (FAQ #9)

32. FDACounsel.com “…of a covered study” See definition of “covered clinical study” at 21 CFR 54.2(e) But, the SPOOS definition itself in Rule does not include the word “clinical” – any significance? doubtful probably inadvertent

33. FDACounsel.com “…to the investigator” 21 CFR 54.2(d) defines “clinical investigator”: “…means only a listed or identified investigator or subinvestigator who is directly involved in the treatment or evaluation of research subjects. The term also includes the spouse and each dependent child of the investigator.” PhRMA – companies err on side of inclusion out of fear of omission leading to regulatory challenge by FDA

34. FDACounsel.com “…investigator” What about payments to a corporation controlled by the investigator? “…or [to] the institution…” What if a related entity, but not legally same as the institution (e.g., WARF vs. U. of Wis.)? Rule – defines investigator Preamble – also clarifies no duty on business partners (Comment #18) Guidance – only if parent company itself is a “Part 54 sponsor” (FAQ #22) BUT – what re Publicly-held parent vs. privately held operating subsidiary ?

35. FDACounsel.com “…to support activities of the investigator…” “Support” FDA – little written on its precise meaning presumably, it’s inverse of a study cost “Activities of the investigator” what if give money for “indirect” reasons – agreement not to study anyone else’s NSAID? scholarship/fellowship funds [allows institutional funds to be used for other purposes; indirectly leaving more money for CI’s activities] general grant to CI’s Dept.? Guidance – “direct support” (FAQ #25)

36. FDACounsel.com “…that have a monetary value…” When is value measured? at initial donation? $75,001 piece of lab equipment; 3-year depreciation; study takes 2 years; do you need to disclose? at end of study? How long does it have to stay >$25G? [contrast here to stock; which is not SPOOS] What if value fluctuates – rarer; could happen – e.g., donated raw materials for experiments; Rule and Preamble are silent; Guidance – only addresses stock fluctuations

37. FDACounsel.com “…of more than $25,000…” Thus, must be at least $25,000.01. Picayune lawyer’s observation # 1 – Guidance incorrectly says “$25,000 or more” Aggregate payments relative to the >$25G threshold? Rule – silent Preamble – silent Guidance – “cumulative monetary value”

38. FDACounsel.com “ … exclusive of the costs of conducting the study or other clinical studies … ” Exclusion – necessary or you would be disclosing the study costs themselves; presumably those are “for services rendered” and/or direct expenses Costs – what is a cost: overhead – what if excessively allocated to the study? profit allowed?

39. FDACounsel.com “ … (e.g.,) By including some examples, does NOT exclude others meeting definition Specifics listed: a grant to fund ongoing research compensation in the form of: equipment, or retainers for ongoing consultation, or honoraria

40. FDACounsel.com “ …during the time the clinical investigator is carrying out the study…” When does a study begin? Guidance – by implication, cites to 21 CFR 312.53 and 812.43 as keying when an investigator’s involvement in a study starts (FAQ #6) Why important? what if there was a payment just before site initiation cleared, but the protocol has been signed? IND on file naming that investigator?

41. FDACounsel.com “ … and for 1 year following completion of the study …” Varies – no hard and fast rules But, what if the investigator’s role in the study ends on 12/31/02, but the study continues at other sites for more than a year thereafter? Guidance – flexible; can make site specific (FAQ #14) Be sure to establish up front and stick by it and make sure the investigators understand the measure

42. FDACounsel.com Internal Controls Need an interdisciplinary team on this FDA’s view of the time and expense involved is not shared by PhRMA Have a written procedure train on it audit its implementation If you use CROs and other contractors, you will have to ride herd on them

43. FDACounsel.com Tired of SPOOS? A few truly obscure things to know about SPOOS: According to CDRH, applies to payments made for “consolation” – means you have to disclose if they pay you for failing results? on Wall Street, “SPOOS” is the nickname for the Standard & Poors 500 Futures Contract” rule was created on Groundhog’s Day a SPOO is a lifeform on the TV show Babylon 5 [the foregoing brought to you courtesy of Google]

44. FDACounsel.com Questions? Call, e-mail, fax or write: Michael A. Swit, Esq. Law Offices of Michael A. Swit 539 Samuel Ct., Suite 229 Encinitas, California 92024 760-815-4762 ♦ 760-454-2979 (fax) mswit@fdacounsel.com http://www.fdacounsel.com

45. FDACounsel.com About the speaker... Michael A. Swit has extensive experience in all aspects of FDA regulation with a particular emphasis on drugs and medical device regulation. In addition to his regulatory law experience, Mr. Swit also served for three and a half years as vice president and general counsel of Pharmaceutical Resources, Inc. (PRI) a prominent generic drug company and, thus, brings an industry and commercial perspective to his representation of FDA-regulated companies. While at PRI from 1990 to late 1993, Mr. Swit spearheaded the company’s defense of multiple grand jury investigations, other federal and state proceedings, and securities litigation stemming from the acts of prior management. Mr. Swit then served from 1994 to 1998 as CEO of Washington Business Information, Inc. (WBII) a premier publisher of FDA regulatory newsletters and other specialty information products for the FDA publishing company. Before starting FDACounsel.com, he was with Heller Ehrman from May 2001 to May 2003, and also twice in private practice with McKenna & Cuneo, from 1988 to 1990 and, most recently, from 1999 to 2001, first in that firm’s D.C. office and most recently, in its San Diego office. He first practiced FDA regulatory law with the D.C. office of Burditt & Radzius from 1984 to 1988. Mr. Swit has taught and written on a wide variety of subjects relating to FDA law including, since 1989, co-directing a three-day intensive course on the generic drug approval process, serving on the Editorial Board of the Food & Drug Law Journal, and editing a guide to the generic drug approval process, Getting Your Generic Drug Approved, published by WBII. Mr. Swit holds an A.B., magna cum laude, with high honors in history, in 1979, from Bowdoin College, and earned his law degree from Emory University in 1982. He is a member of the California, Virginia and District of Columbia bars.